On Feb. 8, Elizabeth Flock, had an interesting in-depth article in US News and World Report about competition between macro brewers, such as Anheuser-Busch, and craft brewers. The key players in her story are several craft brewers, Jim Koch and Sam Calagione and the brewing industry trade associations.
One of the first industries to form trade associations, the brewing industry currently has two. All brewers can belong to the Beer Institute; however it functions as the mouthpiece of the macro brewers. It is the successor organization to the United States Brewers Association which existed from 1862 to 1986.
The craft brewers all belong to the Brewers Association which, in 1941, originated as the Small Brewers Association. Recently the Brewers Association created a definition of craft beer. Part of the definition is that the brewer must brew less than 6 million barrels a year. This measurement allows Jim Koch, owner of Boston Beer, to claim craft beer status.
In the article Flock notes that Chris Thorne of the Beer Institute claims that the concept of craft beer is just “a marketing term”. It is in the interest of craft brewers to distinguish themselves from the macro brewers. Macro brewers, on the other hand, would like to associate themselves more closely with the craft brewing sector. Craft beer is the only part of the brewing industry that has experienced real growth in the past few years.
Flock details the various points of conflict between the two facets of the brewing industry. She indicates that one area of agreement is on federal taxes. All parts of the brewing industry would like to see them lowered.
Other aspects of the tax code do not generate as much harmony. The Brewers Association is seeking to expand the amount of production that can qualify for a small brewers tax decrease. Currently brewers of less than 2 million barrels a year are eligible for a tax reduction. The new legislation would increase eligibility to six million barrels.
This differential tax rate dates from 1976 and was a moment of true cooperation between small and large brewers. The Brewers Institute does not support the Small Brew Act.
The issues facing the brewing industry are not new ones. Since 1862and the imposition of federal taxes the brewers have always sought to have the lowest rate possible. Completion between large and small brewers became a fact in the late nineteen century, reemerged during Repeal and has continued unabated.